Tuesday, July 28, 2009

Milton Friedman, the champion of liberty and free markets, once said that "If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand." Venezuela has gone a long way to proving him right, as President Chavez has systematically regulated and nationalized the economy with disastrous results. As Reuters reports, Venezuela, traditionally a coffee exporter, is now having to import coffee for the first time ever:

Venezuela is known to produce some of the best quality Arabica coffee anywhere and, unlike many countries in the region, traditionally consumed most of it itself.

But more recently large quantities of coffee have been smuggled across the border to Colombia, where prices have been more than double the fixed 470 Bolivares ($218) per bag that producers are paid in Venezuela.

On-and-off food shortages for years have dogged the government of President Hugo Chavez, a former paratrooper who has nationalized several industries and expropriated land as part of his socialist revolution.

Critics point the finger at price and foreign exchange controls that have slowed investments in expansion and maintenance and eroded productivity.

Producers say rising costs and prices fixed by the government have caused production to fall and illegal exports to rise.

And Venezuela's oil industry is suffering also, in addition to the whole country suffering from an exodus of the country's best and brightest:

Artists, lawyers, physicians, managers, and engineers are leaving the country in droves. An estimated 1 million Venezuelans have moved away since Chávez took power, and a study by the Latin American Economic System ... reports that the outflow of highly skilled labor from Venezuela ... rose 216 percent between 1990 and 2007.

The exodus is sabotaging the country’s future, and no industry has been harder hit than Venezuela’s oil sector. A decade ago, Petróleos de Venezuela ranked as one of the top five energy companies in the world. Then Chávez named a Marxist university professor with no experience in the industry to head the company. PDVSA’s top staff immediately went on strike and paralyzed the country. Chávez responded by firing 22,000 people practically overnight, including the country’s leading oil experts. As many as 4,000 of PDVSA’s elite staff are now working overseas, and the talent deficit has crippled the company: PDVSA produced 3.2 million barrels of crude oil a day when Chávez took control, but now pumps only 2.4 million, according to independent estimates.

It is a real shame that President Obama thinks so highly of Chavez, and so little of the free market. Fred Barnes notes that "the president talks as if free market solutions are nonexistent, and in his mind they may be. Three weeks after taking office, he said only government "has the resources to jolt our economy back into life." He hasn't retreated, in words or policies, from that view."